German investor expectations take January hit

Path out of recession 'burdensome and long:' ZEW

By

WilliamL. Watts

LONDON (MarketWatch) -- A closely-watched indicator of investor sentiment in Germany fell more than expected in January, reinforcing expectations Europe's largest economy and the euro zone are set for a sluggish and potentially bumpy recovery in 2010.

The Mannheim-based Center for European Economic Research, or ZEW, said its expectations index fell to 47.2 in January from a reading of 50.4 in December, marking the fourth consecutive monthly decline. The index measures the response of professional investors polled on their expectations for the German economy over the next six months.

Economists had forecast a smaller decline to 49.8.

"The assessment of financial market experts suggests that we will see an economic recovery in 2010 at best, but not a clear economic upswing," said ZEW President Wolfgang Franz. "The way out of recession is burdensome and long."

Meanwhile, investors' assessment of the current economic situation in Germany improved in January, rising to -56.6 points from -60.6 in December.

The euro, already under pressure amid ongoing worries over Greece's debt troubles, extended losses after the data and remains 0.4% lower versus the U.S. dollar at $1.4331. The single currency fell 0.7% against the British pound to trade at 87.40 pence.

The decline may reinforce economists' concerns that the euro-zone recovery is losing momentum. Full-year gross domestic product data from Germany released last week indicated that growth stagnated in the fourth quarter.

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